Are you facing a debt problem this January? 7.9 million people in Britain will be according to a new survey
For people with money difficulties, January is usually the hardest month to get through. Some of the reasons include:
- if you are paid monthly, you may have got your December wages before Christmas rather than at the end of the month, so one month’s money has to stretch for five or six weeks;
- if you are paid weekly and get Universal Credit, you may not have had any UC payments at all in the “5 week December”;
- most people spend more on food over the Christmas period, so the money goes faster;
- the kids are at home from school so they are eating more and it’s cold, so your heating bills are higher;
- the larger credit card and catalogue bills with the Christmas presents you bought come towards the end of January,
- for the self-employed, there may be tax bill due.
That all adds up to a money crisis for many people. And it’s going to be worse in 2018 because wages and benefits have lagged behind inflation so people have been using credit to bridge the gap.
So if you can’t pay all your bills and debts this month, what should you do? Here is a practical list – starting with things you shouldn’t do, as they will make your life harder next month!
Many of the worst fears about missing a loan or credit card payment aren’t going to happen:
- you can’t get sent to prison for it;
- you won’t have bailiffs knocking on your door (well not unless you ignore the problem for a very long time, see How to stop a debt being sent to the bailiffs).
If you are stressed, it gets harder to make good decisions. Taking the first steps to sorting out your debt will help you to feel calmer.
Don’t borrow more
Your borrowing may have been edging up for some time and now your cards and overdraft are close to, or already, maxed out. Borrowing more this month means your position next month is even worse.
Making the decision to not borrow more is the first step in gaining control over your situation. When you are in a hole, stop digging!
Don’t ignore the problem
Late payment charges being added or being taken to court will make your debts even worse. Perhaps you haven’t even looked at your credit card statement as you know it’s going to be bad. Then the bills are always going to be in the back of your mind, lurking there and stopping you enjoying life. So open that letter or click on that email link, because in the end not knowing is worse.
Know your priorities
Some creditors shout louder but often the really important ones are quiet… What is a Priority debt? explains why some bills are more important than others. Make a list of your debts and monthly bills and go through marking them as Priority or Non-Priority.
Your other top priority is your essential expenses: food, toiletries, transport to work etc. When you have paid for these essentials and paid your priority debts, the money that is left is all that is available for credit cards, loans and catalogues. Don’t pay these “consumer debts” first and leave yourself short for everyday living.
Can you improve your situation?
If you just have a temporary crisis, not a long-term problem, these Emergency budgeting ideas may be enough to get you through. But don’t fool yourself – is February really going to be any better?
Here’s is a list of 88 ways to save money – which of them will work for you?
Are you getting all the benefits you should be? If benefit problems are the cause of your debt problems, get some help to sort them out from your local Citizens Advice.
Tell a creditor what you can afford
If you only have one or two problem bills, a simple approach is phone or write and tell them why you can’t pay them in full this month. Explain your situation, whether your hours have been cut, your benefits have stopped or things have just got too much. Offer them a monthly amount you can afford – a token £1 a month payment if necessary – and ask them to freeze interest and not add charges.
You are trying to make an arrangement that will last a while, so:
- don’t promise to pay them next month if that depends on you finding another job or your health problem going away;
- it’s better to offer a realistic payment than promise too much and have to phone them up next month to reduce it.
Some firms may offer to freeze interest or reschedule a loan so it is more affordable. Sometimes a creditor will say they can’t do anything until you have actually missed a payment, which is annoying but you’ve done the hard bit making that first contact and calling them in another few weeks is going to be easier.
This may feel impossible if you have lots of creditors. Or it may seem too scary, especially if you are depressed or anxious.
Contact a debt adviser
It’s a good idea to get some expert help in any of these situations:
- if you have too many creditors to deal with;
- a creditor won’t agree to what you offer them;
- it’s too stressful to talk to them yourself;
- if you don’t know how much to offer;
- when your debts seem to large to repay in a reasonable time.
No matter how bad your situation feels, there is help available. If you want to know more about the possible options, read An overview of debt solutions – that has a simple diagram which is surprisingly accurate at letting you see which might suit you!
What is a good place to get advice depends on where you live and what sort of debts you have. All the suggestions in that link go to reliable advice, where the person you are speaking to will not make more money whatever you choose to do. You will be speaking to a sympathetic person in confidence, they can help you to look at your whole situation and explain what your options are.
Debt advisers don’t just tell you what to do. They may be able to negotiate directly with your creditors and arrange affordable payments for you. Or set up a debt management plan so you just make a single payment which is divided between your creditors. Or help you choose between the different types of insolvency.
StepChange say that over half their clients wait more than a year between realising they have a problem and getting debt help. During this time their finances got worse not better. If you aren’t sure that your problem is serious enough to need debt advice, it’s still worth talking it through because the sooner you call, the more options you will have.
This article is updated and republished each year in January.